Note 2 - Acquisition

9 Months Ended

Sep. 30, 2012

Business Combination Disclosure [Text Block]

Note 2: Acquisition

RealEstate.com Acquisition

On September 16, 2011 we acquired the assets of RealEstate.com for $8.25 million in cash. RealEstate.com provides real estate information, tools, and advice to consumers seeking to buy or sell homes. Our acquisition of the RealEstate.com assets allows us to leverage the strong domain name and traffic to extend our marketing solutions.

The transaction was accounted for as a business combination, and accordingly, all of the assets of RealEstate.com were measured at fair value on the acquisition date. The following table summarizes the consideration paid for the identifiable assets acquired and their respective weighted average lives:

	Amount		Weighted Average Life ( in year)
Trademarks/Domain Names	$	7,051		5.0
Developed technology		1,199		3.0
	$	8,250		4.7

These fair values were based on estimates as of the closing date of the acquisition. We used the income approach to value the identified trademarks/domain names and the cost-to-create method to value the developed technology. Under the income approach, fair value is estimated based upon the present value of cash flows that the applicable asset is expected to generate. These fair value measurements were based on significant inputs not observable in the market and thus represent Level 3 measurements as defined in ASC 820.

SharperAgent Acquisition

On August 1, 2011, we acquired SharperAgent, LLC (“SharperAgent”), for $1.74 million in cash plus assumed liabilities. SharperAgent is a leading provider of online and print marketing suites to the real estate industry with more than 30,000 real estate agent users across North America. Our acquisition of SharperAgent allows us to integrate SharperAgent’s marketing campaign, design, and print capabilities with our premium product offerings as a continued expansion of our business and marketing platform for real estate professionals.

The transaction was accounted for as a business combination, and accordingly, all of the assets and liabilities of SharperAgent were measured at fair value on the acquisition date. The following tables summarize the consideration paid for SharperAgent and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.

Cash Paid	$	1,737
Less: Total identifiable net assets		(1,608	)
Total Goodwill	$	129
Cash	$	81
Trade Receivables		136
Property and Equipment		277
Identifiable intangible assets		1,403
Other assets		16
Trade payables and other liabilities		(305	)
Total identifiable net assets	$	1,608

The intangible assets acquired and their respective weighted average lives are as follows:

	Amount		Weighted Average Life (in years)
Developed technology	$	1,078		3.0
Customer base		325		3.0
	$	1,403		3.0

These fair values were based on estimates as of the closing date of the acquisition. We used the income approach to value the identified intangible assets. These fair value measurements are based on significant inputs not observable in the market and thus represent Level 3 measurements as defined in ASC 820. Under the income approach, fair value is estimated based upon the present value of cash flows that the applicable asset is expected to generate. The valuation of the developed technology was based on the relief-from-royalty method and the existing customer relationships were valued using the discounted cash flow method.

Goodwill of $129 primarily consists of the benefit of acquiring new expertise and enhanced service offerings that we can leverage into both our existing customer base and in acquiring new customers. The goodwill recognized is expected to be deductible for income tax purposes.

KWKLY Acquisition

On January 7, 2011, we acquired substantially all of the assets of KWKLY, LLC (“kwkly”). kwkly is a mobile software-as-a-service lead generation platform that provides home buyers with real-time access to property information on their Web-enabled phones, while at the same time connecting real estate professional customers of kwkly with those home buyers. Our acquisition of kwkly expands the offerings that the Company can make available through its business and marketing platform for real estate professionals.

The transaction was accounted for as a business combination, and accordingly, all of the assets of kwkly were measured at fair value on the acquisition date.

We paid cash consideration of $750, issued 222,222 shares of stock that were valued based on the closing stock price on January 7, 2011 of $1.80, and granted a fully vested non-qualified stock option to purchase 250,000 shares which was valued using a Black-Scholes fair value of $0.7936 per share.

Below is a summary of the total consideration transferred:

Cash	$	750
Stock		400
Stock options		198
	$	1,348

The recognized amount of identifiable assets acquired:

Identifiable intangible assets	$	570
Goodwill		778
	$	1,348

The intangible assets acquired and their respective weighted average lives are as follows:

	Amount		Weighted Average Life (in years)
Developed technology	$	445		3.0
Customer relationships		50		3.0
Home listings Data Feeds		75		1.0
	$	570		2.7

These fair values were based on estimates as of the closing date of the acquisition. We used the income approach to value the customer relationships. These fair value measurements were based on significant inputs not observable in the market and thus represent Level 3 measurements as defined in ASC 820. Under the income approach, fair value is estimated based upon the present value of cash flows that the applicable asset is expected to generate. The valuations of the developed technology and the home listings data feeds were based on the cost to recreate method. These fair value measurements were also based on significant inputs not observable in the market and thus represent Level 3 measurements as defined in ASC 820.

Goodwill of $778 primarily consists of the benefit of acquiring new expertise and a new product in the mobile space that we can leverage into our existing customer base. The goodwill recognized is expected to be deductible for income tax purposes.

For comparability purposes, the following table presents our unaudited pro forma revenue and loss had the RealEstate.com, SharperAgent, and kwkly acquisitions occurred on January 1, 2011:

	Nine months ended September 30, 2011 (Unaudited)
Revenues	$	27,544
Net loss attributable to Market Leader	$	(18,675	)

Included in the pro forma net loss is a $5 million asset impairment loss associated with RealEstate.com.